Tales and Opinion from the Front End of Credit Broking

Last week, I was invited to present to a network of IFAs, and a very constructive experience it was.

For a long time in my career in second charges it has felt like second mortgage packagers have been looked on as junior partners at best. Now, I am by no means the most neurotic individual within the packager landscape, however it would be fair to say that even I have perceived a tangible derision from IFAs to second mortgages, moreover, second mortgage packagers.

I’d never really understood it until a conversation with the principle of the network I visited!

A conversation that went something like this (when I say “something like this” I mean to say “exactly like this”):

Me: “So I won’t ask which second charge packagers you use as that would be lazy to play myself off against them, however I would ask, individually, how many second mortgages do you introduce per year?”

Principle: “I don’t do them, well, I didn’t do them, MMR has changed that which is why you are here”

(at this point it might be worth saying that I don’t know what my face is doing 100% of the time, I think it might have looked something like this:

only less Chinese)

Me: “Why not?”

Principle: “Because *** phone me every couple of days pestering me for business, I am so sick and tired of them, I have even told them to f*** off and it doesn’t work, it has put me right off secured loans because *** keep banging on about being market leading, so if the market leaders are this much of a pain in the arse it doesn’t look great.”

Me: “Oh…well we are very different to ***, let me prove it”

Happily since that conversation, the network has sent me half a dozen leads, but it did get me thinking.

How many other independent advisors, mortgage brokers, networks are getting the wrong impression of what we do based on output from companies with greater market presence and all the bright marketing, but less expertise/professionalism?

That may well come across as me being conceited, but it seems that light travels faster than sound that’s why some people appear bright until you hear them speak, is an unfortunate and depressing truism in our industry.

To top it off, a couple of days after this meeting, we had an email from *** asking for our referrals, here it is:

Hello,

To Further our call a little time ago, I am sending you this email to point out the pro’s and con’s of using ***.

As I mad you aware on the telephone we specialize in bridging and commercial finance.

Why should you use us? Well, we are one of the best on the market at placing business.

We also have all of these reasons:

No exit penalties available.

13 years experience

Over 100 close relation lenders.

Loans available in England, Wales & Scotland.

Minimum loan of £25k

No Maximum

Working to 65-70% ltv.

Dedicated broker managers.

To Give you a basic information of what I am offering,

If you were to pass me a case, I would undertake all work associated with the case in hand.

All that I would ask of you is to keep your client informed of exactly what stage we are at, and inform them of all details I would pass on to yourself. The reason I ask this is due to the fact that I understand that you have a fantastic relationship with each and every one of your clients and I would not want that to change in any way shape or form.

Personally I like to be fast an efficient in all the work I do. So from the second you pass me a case I will be attentive and try my very best to get you terms in the same day.

A massive incentive for you passing me a case is cash. And that is exactly what I am offering.

A bridging loan should be completed in 14 days, if not then it’s not a bridge.

On the 14th day ( day of completion ) I would simply hand you 50% of the commission. On average I pay £1000 to £1500 for any bridging case passed to me.

Not a bad little wage to earn of me doing work on your case!

I hope this educates you more on what exactly ***as a business offer.

I hope to hear from you soon.

Kind Regards

Aside from removing the trading name, this email is unchanged.

We have NEVER had a conversation with the company in question to introduce business to them, and the greeting is impersonal, but that doesn’t begin to explain how bad it is really does it?

If potential partners are considering introducing business to a third party, a secured loan/bridging packager in particular, to a product marketplace for which they have in the past held a dim view; is it fair to suggest that an email from “market leaders”, containing; misplaced capitals galore, hilarious miss-spelling “as I mad you aware” (this awareness must have been “mad” during the imaginary conversation we had), phantom apostrophes and a myriad of grammatical crimes, would put them off engaging?

let’s be honest, it reads like Arthur Daly trying to flog a second hand greyhound “A massive incentive for you passing me a case is cash. And that is exactly what I am offering.”… shudder

If anything, it gives the impression that the entry level for employees within our industry is very low indeed.

Rest easy finance professionals, second charge/bridging packagers aren’t all glorified chimps tea parties, it just so happens that the emptiest vessels making the most noise, are clouding your judgement.

This morning three conversations have made me think of the endless optimism and faith in divine intervention.

All three have gone much like this conversation which typified the issue:

Me: “Hello I’m calling because I am in your area next week and wondered if I could visit to discuss secured loans with April the 1st in mind”

Broker: “why?”

Me: “Well if you write mortgages then secured loans will have to become a feature of your decision making from April the 1st with FCA taking over regulation of the product. Even if you don’t use secured loans, you will need to demonstrate they have been considered”

Broker ” Not interested mate, I’ve never done a secured loan, and I have no plans to do so. Click”.

Oh the “click” was the sound of the phone hanging up, not some sort of maniac verbal idiosyncrasy that one might as a suffix to a sentence definable by its ignorance and insanity. A click that signified “rebuttal not welcome”.

Insanity aside, practices taking this view are surely incubating an egg that will hatch into a nightmare legacy.

FCA “So you re-mortgaged your client to a higher rate and they paid a 6% exit penalty? Why?”

Broker “They wanted a further £50,000 and their current lender would not agree to a further advance”

FCA “Did you consider a secured loan?”

Is this the moment a broker’s professional life flashes before his or her eyes? A slow motion car crash moment as the words formulate from a mouth that had previously rebuked a hundred loan packagers, those words that had condemned a hundred conversations to be ended by an abrupt “click”, those words that will now condemn and confound their predicament “I don’t do secured loans”.

The “oh god” moment, the family fortunes negative buzzer moment, a hundred conversations flashing through his mind, “I can help you with secured loans” click “We do secured loans” click “have you thought about secured..” click “Secured…” click “hey honey let’s have sec…”click.

CLICK. CLICK CLICK.

It reminds me of an old joke where a devout christian ends up capsized on his boat in the middle of an ocean. After an hour a lifeboat shows up, “don’t worry he says” rejecting the assistance “my god will save me”. Two hours later a cruise ship passes by, “don’t worry, my god will save me”, four more hours a trawler “don’t worry, my god will save me.”

6 hours later, the devout christian is drowned, his first words to St Peter are “why didn’t you save me? I go to church every sunday, where were you?”

To which St Peter replies: “We sent you a bloody lifeboat, a cruise ship and a trawler, what more do you flaming well want?”

Therein is the crux of the matter, when brokers inevitably fall foul of FCA compliance for not looking to secured loans, will they be saying; “Where was my help with the product” or “nobody helped me”?

Having read this excellent blog from my contemporary; Bradley Moore at Brightstar: http://www.bestadvice.co.uk/much-evidence-ignore/ I came away with a sense of frustration, which has subsequently developed into a need to evangelise. My frustration came from this phrase:

“Only last week, I was talking to a very respected industry figure with responsibility for his firm’s stance of all things lending related. When the subject of second charge lending came up, he told me that their brokers were told not to engage”

There is certainly a schism within the mortgage broking field, a distinct step between those who embrace second charge secured loans as a viable tool to assist their clients in the short to medium term, and those who think that secured loans are a product akin to introducing Sauron to Middle Earth, wreaking financial ruin upon a previously happy client.

It’s a serious question, I read an article today that left me bereft as to why anyone would begin to consider this career choice if they knew what a battering they would take on a yearly basis from lenders and regulators on an annual basis.

Here is that article http://www.moneymarketing.co.uk/2006554.article?cmpid=pmalert_133747

The article, from the respected Money Marketing journal states that since 2010 “Lenders have kicked at least 676 mortgage broker firms off their panels over the past four years.”

You could take the view that this is an overdue purge of the industry whereby rogue brokers are being rooted out by lenders. This of course is to be welcomed with open arms, the secured loan industry would of course benefit from this sweep also. However scrape the veneer of the story away and speak to a mortgage broker and some of the reasons “where major lenders have refused to give…

So 2014 is bidding farewell to it’s first month and the scent of optimism is in the air.

Indications that the economy is finally on the up and up, a new housebuilding programme being mooted, house prices on an upward trend and deposit help for first time buyers.

A good time to broking mortgages, and we al know a builder right?

Surely a great time to be a builder, developer or architect too right? The sound of rusty trowels, setsquares and spirit levels being picked up from yards, storage and drawing boards fills the air like spring birdsong, or at least it should.

If you are a mortgage broker, IFA, or indeed an introducer of finance leads, you will no doubt face a deluge of packagers calling you on a daily basis offering you their wares.

Each call a different shade of drab grey until come the end of the week you’ve experienced fifty different shades of the same grey prattle. Fifty shades of grey that have as much excitement and sex appeal as a Dulux grey colour chart, with nothing to skip a heartbeat, race a pulse or twitch a hormone.

Same old “I want to build a rapport with you.”… “Did you know that secured loans are an alternative to remortgages?”… “Use our software meaning you never need to speak to a human again to do business”… “Did you know rates start from 5 point whatever” … “blah, blah, blah”…